Red Flag 13. Depleting or polluting natural resources or public goods such that it undermines access or health

RED FLAG # 13

The business’s commercial success substantially depends upon: Depleting or polluting natural resources or public goods such that it undermines access or health.

For Example
  • Industrial activity that leads to pollution of the environment (i.e., water, biodiversity, soil and/or air) at levels that – even if within legal limits – have an impact on people’s health
  • Manufacture/sale of products that release pollutants such as “forever chemicals” or materials that could contribute to micro-plastic accumulation
  • Harvesting or destruction (including through introduction of invasive species) of wild flora and fauna by agricultural or pharmaceutical companies depleting traditional food sources on which indigenous and other communities rely
  • Land-based extractive projects that lead to an influx of people that places stress on ecosystem and human services, such as in communities near mine sites
  • Extractive industries (terrestrial and marine), industrial fishing, or aquaculture projects that negatively impact marine ecology on which fishing communities depend for their livelihoods
  • Companies, including technology companies, establishing large corporate headquarters in urban areas where this reduces access to affordable housing
  • Water extraction by food and agribusiness, beverage, apparel or technology companies leading to water stress in a given catchment
Higher-Risk sectors
  • Extractive industries (terrestrial and marine)
  • Energy production and distribution
  • Chemicals manufacturing, including petrochemicals and plastics manufacturing
  • Large-scale infrastructure projects, e.g. hydropower projects, construction projects
  • Manufacturing, including metals, electronics, aerospace and automotive manufacturing
  • Technology
  • Fisheries and aquaculture
  • Apparel and textiles
  • Food and beverage
  • Agribusiness, forestry, and industries that rely on agricultural commodities
  • Consumer products, including health and beauty products and supplement products which incorporate natural resources relied upon by indigenous populations

Red Flag 12. Land use in geographies where ownership may be contested

RED FLAG # 12

Land use in geographic locations where ownership is contested or records are unreliable or land users such as indigenous groups are unrecognized.

For Example

Relying on land use, including for infrastructure, energy, extractive or carbon offset projects or the provision of commodities (e.g., timber, biofuels), in locations where:

  • Indigenous Peoples have traditional ownership or use of land
  • Ethnic/minority groups have historically been denied or dispossessed of formal land ownership rights
  • Women may not have access to legal land ownership
  • People live and work on communally held land without formal legal title
  • Owners of land may have been otherwise dispossessed or moved without consultation or adequate compensation
Higher-Risk Sectors
  • Large-scale infrastructure (e.g., ports, roads, urban development)
  • Renewable and conventional electricity generation and distribution (e.g., wind and solar farms, dams, power plants, transmission lines)
  • Fossil fuel exploration, extraction and transportation (e.g., oil fields, pipelines)
  • Mining and mineral exploration
  • Information and Communication Technology (e.g., phone and transmission lines; masts and towers; data centers)
  • Forestry (e.g., timber extraction, pulp and paper)
  • Industrial agriculture (e.g., crops, livestock, irrigation projects, biofuels)
  • Tourism (e.g., resort areas)
  • Nature-based solutions for carbon mitigation/sequestration (e.g., reforestation or afforestation projects, agroforestry)
  • Nature conservation projects

Red Flag 11. Speed in developing products or services, or delivering projects with risks to health and safety

RED FLAG # 11

Speed in developing products or services, or delivering projects, such that excessive pressures are placed on workers or consumer safety is compromised.

For Example
  • Setting extremely abridged timelines for product development in order to meet launch dates or to be first to market, for example, when undertaking rapid product development in the tech sector, leading to workers working excessive hours
  • Requiring excessive speeds for the manufacture or processing of goods such as meat & poultry or other fast moving consumer goods, impacting the safety or other working conditions of workers
  • Requiring speed from workers to meet commitments
    made to clients, such as providing round-the-clock
    responsiveness to client requests in legal advice,
    management consultancy or other client services, affecting the family life of workers
  • Providing or changing orders to suppliers with insufficient lead time for capacity planning, impacting the health, safety and wages of supply chain workers
  • Placing excessive pressure on suppliers for speed in production in the lead up to events, or to meet seasonal demand, such as in the harvesting of seasonal agricultural commodities, exacerbated by changing climate conditions, such as extreme heat
  • Expediting R&D for new or updated products/services (including AI-related technologies) to market, leaving insufficient time to test for potential impacts on users/ customers
  • Delivering construction projects with unattainable
    schedules or particularly inflexible deadlines (e.g.
    associated with large sporting events, data centers, or
    rapid expansion of renewable energy capacity)
  • Rushing minerals to market to meet decarbonization – or digital transformation – related demand without regard to the conditions faced by supply chain workers.
Higher-Risk Sectors
  • Apparel
  • Companies with labor-intensive production lines, such as beef, pork and poultry processing plants
  • Mining of high-demand or “critical” minerals, such as cobalt, lithium or copper
  • AI and Tech, including start-ups pursuing rapid growth
  • Fast-moving consumer goods, including those reliant on agricultural inputs
  • Toy Companies
  • Food and beverage companies, including those reliant on agricultural inputs
  • Law firms
  • Management consultants, PR firms, advertising agencies, accounting firms and other client services industries
  • Construction, including in the context of: (i) particularly time bound projects such as mega sporting events, and; (ii) rapid expansion plans, such as renewable energy

Red Flag 4. Privatized access to public goods with risks to quality of services

RED FLAG # 4


The business’s commercial success substantially depends upon offering privatized access to public goods and services, such as water, health, security and housing, where profit-maximization affects
access or quality

For Example
  • Offering private water or sanitation services where profit-maximization affects access or quality of service
  • Offering nursing home services and engaging in cost-cutting activities at the expense of quality of service
  • Offering for-profit daycare or education services and engaging in cost cutting activities at the expense of quality of service
  • Providing private prisons or detention centres and reducing qualified staff or cutting maintenance or essential programs to achieve cost savings
  • Privatization of public transport, where profit-maximisation results in reduction in frequency of services or access for isolated communities
  • Investing in companies engaged in essential services where profit maximisation conflicts with quality of service
  • Private sector involvement in public sectors through Public Private Partnerships or Private Finance Initiatives, e.g. for infrastructure and maintenance services for hospitals and schools where quality or access is adversely affected
  • Providing consulting services to governments where advice on profit maximisation risks affecting access or quality of essential services
  • Financial institutions contributing to the financialization of housing — for example, through mortgage policies that favor speculative investment over owner-occupation, such as high-leverage or interest-only loans and bulk sales of foreclosed properties to institutional investors — and by subsequently driving up prices through securitization of those mortgages and other property-backed financial instruments.
  • Financial institutions contributing to the financialization of food commodities or water by speculating on debt of companies in these sectors, including through credit default swaps and other financial derivatives
Higher-Risk Sectors
  • Water and sanitation services
  • Agriculture industry
  • Healthcare
  • Care industry, e.g. nursing homes, children’s homes, assisted living facilities
  • Private prison industry
  • Education
  • Public transportation services and infrastructure
  • Waste management
  • Capital and Advice concerning essential service:
  • Private equity (esp. external, leveraged financing)
  • Financial institutions, including banks, private equity and other providers of capital
  • Management consulting

Red Flag 3. Project timelines that undermine consultation with communities

RED FLAG # 3

The business’s commercial success substantially depends upon construction or commencement of projects with timelines that do not allow sufficient time for consultation with groups affected by the projects.

For Example
  • Extractives projects being planned and costed such that there is not adequate time for local communities to be consulted about potential negative impacts, nor for mitigations to be put in place.
  • Infrastructure projects, including renewable energy developments, that are “fast-tracked” or authorized and completed before local communities are able to express concerns, seek mitigation for negative impacts or secure appropriate benefit-sharing agreements.
  • Mega-events (sporting, exhibitions, fairs) that have tight timelines from project award to delivery of the event.
Higher-Risk Sectors
  • Extractives – particularly mining and oil/gas
  • Construction – particularly large infrastructure projects, including linear infrastructure such as railways, highways, transmission lines, particularly in geographies that don’t require or actively discourage public consultation
  • Agriculture – particularly large-scale operations such as rubber or biofuel feedstocks
  • Energy utilities – particularly those that involve infrastructure such as wind or solar farms, hydroelectric dams, transmission lines and related infrastructure
  • Sporting bodies and sporting associations – particularly in the organization of mega-sporting events
  • Banks, private equity and development finance institutions that finance projects in the above categories and require a fast return on investment, incentivizing project teams to work within compressed schedules to reach key milestones and start generating revenue as quickly as possible.
Questions for Leaders
  • To what extent are our project timelines able to accommodate engagement with groups impacted by the project?
  • How do we know we are identifying and engaging with the appropriate stakeholders?
  • Do we have sufficient understanding and internal capacity to engage with groups affected by the project?
  • How does the company ensure that potentially impacted communities have access to safe and effective ways to raise concerns with the company throughout the project lifecycle?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )

Understanding Risks and Opportunities

Risks to People

Research in the mining sector shows that often there is a tension between “technical time” – the time needed for the construction or completion of a project – and “social time” – the time needed to address community concerns related to the project.

Even when companies see the importance of consulting affected communities, their approaches are not always effective.

  • A survey of construction project managers shows that while they believe engagement with the local community improves relationships, they see it as a burdensome, arduous, time consuming and costly process.

  • A Chatham House report with perspectives from the extractives sector shows that even though setbacks from break-downs in community relations are costly, community engagement often fails because it is seen as a “distraction,” as a box-ticking exercise, or because community relations officers are marginalized or only involved when things go wrong.

  • Recent research suggests that while more companies are making commitments to free, prior and informed consent (FPIC), implementation is still weak. Further, the UN Special Rapporteur on the rights of Indigenous Peoples has commented that ongoing debates by corporations and governments about FPIClose sight of the spirit and character of these principles” which seek to end historical models of decision-making that have tended to exclude Indigenous Peoples.

  • In a 2024 book exploring the various facets of meaningful stakeholder engagement, the authors highlight that “several studies have found that the practice of stakeholder engagement has been characterized by processes that are often out of touch with the experiences of affected people whose daily lives intersect with the activities of industry.”

  • A 2019 study of Nigerian infrastructure projects highlights significant barriers to meaningful engagement, such as failure to understand stakeholders’ needs and expectations, late identification of stakeholders, failure to identify key stakeholders, failure to identify potential conflict areas, poor understanding of effective stakeholder engagement and timelines misaligned with stakeholders expectations.

Even companies or financial institutions that have policy commitments to community engagement can sometimes have business models that depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders.

The low carbon transition is leading to a growth in business models that carry this risk. The urgency of the global climate challenge and the imperative of transitioning as quickly as possible to a lower carbon economy have, in certain cases, resulted in states and companies “fast-tracking” development of transition mining projects and/or low emissions energy projects. A 2022 study found that, in the case of energy transition minerals, not only is there a risk that procedural safeguards for consultation and consent will be diluted, but also that the future supply of energy transition minerals will exacerbate social inequalities in already vulnerable locations. For example, an estimated 54% of energy transition minerals are located on or near Indigenous Peoples’ land. An Amnesty International study looking at the impact of cobalt and copper mining expansions in the DRC found that many communities around the key mining locations have endured significant impacts as a result of energy transition mineral mining, including the absence of any community consultation and forced evictions. On the renewable energy front, several jurisdictions, including India, South Africa, and Japan, have adopted legislation intended to speed up project development. Unfortunately, such legislation often exempts project companies from or reduces requirements for prior consultations with communities and/or enables forced expropriation of land.

A business model focused on expedited timelines that don’t allow for sufficient consultations, can lead to the following risks to people:

  • Loss of Livelihood and Negative Health Impacts: In Mexico, Indigenous communities near a newly built dam in Sonora were not consulted or informed when the dam started to be filled. As the dam was filled, the communities reported they had not yet been relocated, that the dam had flooded areas where they used to access medicinal vegetation and that the project had cut road links to other communities. In Myanmar, opposition to the Myitsone dam on the Irrawaddy river forced the government in 2011 to put the project on hold. The 3.6 billion USD dam was to be financed by China. The dam itself would displace thousands of people and affect fishermen and communities downstream. The reservoir was expected to flood an area the size of Singapore. Local communities reported losing their farmland, which was the source of their income. In addition, the dam would affect cultural rights, as the Myitsone area is believed to be the birthplace of the Kachin people. In recent years, fears that the project may be revived have sparked new protests.

  • Forced Displacement: In Brazil, residents of Vila Autódromo resisted displacement to clear land for construction of the Olympic Park in Rio de Janeiro for the 2016 Rio Olympics. Although the majority of the residents had been offered compensation, others preferred not to leave their homes and felt the government’s plans to go ahead with construction amounted to forced eviction. In 2024, a French coalition of community associations issued a report asserting that nearly 20,000 people had been forcibly displaced from informal housing between April 2023 and September 2024 as part of preparations for the 2024 Paris summer games. Many of these people were migrants from places like Sudan, Eritrea or Afghanistan that had sought and were awarded asylum in France, but had precarious living arrangements. More generally, research shows that in the 20 years to 2007, approximately 2 million people in different countries were displaced by the Olympic Games. And this phenomenon is global – occurring in Chinese and Brazilian cities hosting sporting events, as well as European cities, such as Paris, Berlin and Barcelona. Non-sporting mega-events have also led to forced evictions and displacement: for example, 18,000 households were displaced in Shanghai, China, in preparation for the World Expo 2010 and early reports indicate that evictions are occurring around the site of World Expo 2025 in Osaka, Japan. In Saudi Arabia, there have been reports of evictions of members of the Howeitat tribe from their homes and traditional lands to make way for the NEOM project, which describes itself as the world’s first cognitive, smart city.

  • Impacts on water availability and quality: In the US, the Standing Rock Sioux and other American Indian tribes raised concerns that the Dakota Access Pipeline could damage their water supply and cultural heritage. In 2020, a court ordered a temporary shutdown of the pipeline, finding that the environmental impact assessment had been inadequate.

  • Environmental Damage: The lack of consultation in the construction of a tourist train in Yucatán, Mexico raised concerns that the new towns that will be created along the line will put pressure on biodiversity and nature reserves which are managed by local communities.

  • Loss of Cultural Heritage: In Australia, the Wangan and Jagalingou community challenged the provision by Siemens of rail signaling to the Adani coalmine, stating that they had not provided approval for the project and the mine would cause environmental damage and limit their access to ancestral ceremonial grounds. In Cambodia, communities from Ratanakiri province filed complaints with the Compliance Advisory Ombudsman (CAO) of the International Finance Corporation (IFC) related to the IFC’s investment in Vietnamese rubber company Hoang Anh Gia Lai (HAGL). Local communities complained that HAGL’s use of its rubber land concessions had resulted in loss of forest and grazing land, destruction of burial grounds, and lack of access to resin trees and non-timber forest products necessary to sustain livelihoods. Moreover, communities reported that no effort was made by HAGL to obtained their free, prior informed consent, involve affected communities in the decision-making process, or provide adequate information to them. As of 2025, the case is still ongoing.

  • Violation of Indigenous Peoples Rights: It is important to highlight Indigenous Peoples as a vulnerable group among affected stakeholders. Failure to obtain FPIC can undermine Indigenous Peoples’ right to self-determination. It can also undermine their access to other rights such as to life, liberty, security, culture, language, spirituality, education, information, employment, etc. A 2023 study found that Indigenous Peoples are affected in at least 34% of all documented environmental conflicts worldwide. More than three-fourths of these conflicts are caused by mining, fossil fuels, dam projects, and the agriculture, forestry, fisheries, and livestock sector.

Risks to the Business

Business models that substantially depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders can lead to the following risks to companies:

Financial, Legal and Reputational Risks:

  • A study digging into the Costs of Conflict for extractive companies identified two broad “cost” categories – costs associated with preventing or responding to conflict (e.g., security, risk management, personnel costs from time spent managing the conflict) and costs associated with the outcomes of conflict (e.g., project modifications, redress, material damage, lost productivity, impact on capital, reputational impact and impacts on personnel) and found that a major, world-class mining project can suffer costs of USD20M per week due to lost sales as a result of temporary shutdowns or delay stemming from community conflicts.

  • First Quantum Minerals was granted a 20-year extension to their copper mining concession in Panama on an expedited basis by the Panamanian government in 2023, allowing little or no time for consultation with affected stakeholders. In response, protests erupted across Panama, including blocking the port that serves the mine, effectively shuttering the mine site. Panama’s Supreme Court then declared the company’s contract unconstitutional and ordered the closure of the mine, which is estimated to cost USD800 million. Discussions around the ultimate fate of the mine are ongoing, but even if temporary, the economic cost of the lucrative mine’s shutdown for both FQM and the Government of Panama has been significant, including lost production and export income. FQM was reportedly spending USD11-13 million/month on labor and maintenance, with no permit to export any of the stockpiled material.

  • A 2021 study by ODI found that social risk mitigation cost about 2% of project costs versus potential financial damages of around 24-37% of project costs when projects failed to achieve social license to operate.

  • In 2024, after a 3-year-long legal dispute, a Parisian court ruled that a civil lawsuit brought by Mexico-based Indigenous communities against EDF can go ahead. The issues underpinning the lawsuit include violation of land rights and inadequate community consultation. The case was filed under the French Corporate Duty of Vigilance Law, designed to hold French companies accountable for abuses overseas.

  • Rapid decision-making that left no time for community consultation underpinned the 2020 destruction of the Juukan Gorge Indigenous cultural heritage site as part of Rio Tinto’s mining operations in Western Australia. The fall-out of this event included intense media scrutiny for Rio Tinto, the resignation of three members of the company’s senior leadership team and two board members, as well as a high-profile parliamentary inquiry. In 2022, the company settled for an undisclosed sum with the impacted Indigenous communities.

  • A 2020 study examined the cost and material losses experienced by ETP and other companies with an ownership stake in the Dakota Access Pipeline (DAPL), which was subject to sustained opposition from Indigenous groups and characterized by widespread national and international protests. The owners lost revenue, operating costs and legal fees estimated at US$7.5 billion, in addition to material downward pressure on the company’s share price.

  • In early 2024, a US federal judge ordered the dismantling of Enel’s 84 turbine operating wind farm, as, according to the decision, the Oklahoma-based project did not undertake sufficient community consultation or respect the land rights of Indigenous Peoples in Oklahoma, US. This tear down is estimated to cost the company US$260 million, in addition to any damages awarded to the Osage Nation who challenged the wind farm.

  • In 2024, Indonesia’s highest court ruled in favor of a community’s petition to revoke the environmental permit for Dairi zinc-lead mine – a decision based partly on lack of citizen participation in the project’s development.

  • Recent disputes over hyperscale data centers in both the U.S. and UK illustrate the risks to business posed by expediting project development processes. In the US, a Virginia judge voided approval for the 1,700-acre “Digital Gateway” project after finding procedural failings in the approval process, following a “rushed” and divisive 27-hour public hearing where residents opposed the project’s proximity to historic and residential land. Similarly, in the UK, a planned 90 MW data center on protected Green Belt land near London is facing a legal challenge for bypassing environmental safeguards and community concerns.

Operational Risks Linked to Social Unrest:

  • From the riots related to the Rio 2016 summer Olympics to the deaths of demonstrators protesting the Conga Mine in Peru, social unrest can create operational risks for the company as well as security risks for company staff and local communities.

  • A 2020 study published in the journal Environmental Research found that opposition to fossil-fuel and low-carbon energy projects are having important operational impacts. Of the 649 projects reviewed that had encountered some form of social resistance, more than 25% were “shelved, suspended or delayed”, suggesting significant operational risk for project proponents, in addition to reputational hits or financial costs incurred, as a result of the media attention and lost time spent on project development, respectively.

What the UN Guiding Principles say
  • Companies can cause adverse human rights impacts when they fail to carry out meaningful consultation with affected stakeholders and their actions negatively affect human rights. A failure to allow time for the conduct of Free, Prior and Informed Consultation (FPIC) with affected Indigenous communities, or to ensure that FPIC with these communities has been conducted by others, is itself a breach of Indigenous people’s human rights. More generally, a company may cause human rights impacts when it sets timescales which preclude consultation with affected communities as part of a risk assessment and mitigation process, and the company’s actions then have negative impacts on communities such as forced displacement, depriving communities of access to water, food or livelihoods or preventing them of entering cultural sites.

  • Organizations (including companies, mega-event organizers and financial institutions) can contribute to adverse human rights impacts when their business models create demand for speed in the delivery of projects by third parties, and the demand for speed prevents third parties from carrying out meaningful consultation with local communities, resulting in adverse human rights impacts.

Possible Contributions to the SDGs

Addressing impacts on people associated with this red flag can contribute to ensuring responsible, inclusive and participatory and representative decision-making at all levels (Target 16.7 of SDG 16: promoting peaceful and inclusive societies).

The results of consultation with groups affected by projects can enable companies to better understand and mitigate risks to people, which can contribute to the following SDGs:

  • SDG 1: End poverty in all its forms everywhere. Meaningful consultation can help ensure that people – particularly vulnerable communities – have equal rights to economic resources, including ownership and control over land.

  • SDG 2: Zero hunger. Meaningful consultation can help agricultural productivity and incomes of small-scale farmers, in particular women and Indigenous communities, including through secure and equal access to land and productive resources.

  • SDG 3: Good health and wellbeing. Meaningful consultation can help protect stakeholders’ health by preventing negative impacts such as pollution of soil, air or water sources, or impacts from poor working conditions such as fatigue, stress and accidents.

  • SDG 6: Clean water and sanitation. Meaningful consultation can help prevent pollution of water sources.

  • SDG 7: Affordable and Clean Energy. Meaningful consultation can help to ensure that clean energy projects are advanced swiftly and with public support.

  • SDG 13: Climate action. Meaningful consultation can help to ensure that the transition to a lower carbon economy is fast because it is fair.

Taking Action

Due Diligence Lines of Inquiry
  • Do we understand the local context and the potential ways in which our project can impact on people?

  • Do we have a process to sensitize our staff about local issues and the local context?

  • Do we know which stakeholders we need to consult and how to structure the consultations to make them meaningful and accessible?

  • Have any vulnerable or historically marginalized groups been identified in or around the project site?

  • Do we know if groups that self-identify as Indigenous Peoples are impacted by the project and, if so, do we understand how that will impact project timelines?

  • Do those responsible for community engagement have the requisite skills and experience for engaging with affected stakeholders, including Indigenous Peoples?

  • Do our project plans allow sufficient time for consultation to take place?

  • Do we actively support community relations managers to carry out the consultations?

  • Does advice from community relations managers get reported to the executive?

  • Are we prepared to review the project plan based on insights from the consultations?

  • Do we measure and/or have we accounted for the cost of conflict with local communities?

Mitigation Examples

* Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

  • In Australia, the co-development of shared standards (e.g., Infrastructure Engagement Excellence Standards) has provided government, industry and communities with a common basis upon which to understand, participate in and assess meaningful community engagement or, in the case of the Best Practice Principles for Clean Energy Projects, to help support indigenous communities in seeking to share the benefits of Australia’s clean energy sector expansion.

  • Encouraging active citizenship by building the capacity of civil society to unlock productive dialogue between the company and local communities. For example, Oxfam’s NORAD project in Ghana, Tanzania and Mozambique to improve petroleum governance.

  • Dialogue tables co-owned by companies, local communities and stakeholders (civil society) as spaces for respectful, patient engagement and joint problem-solving. The dialogue tables can be facilitated by neutral third parties, which can help companies and communities build trust in the process. For instance, Anglo American participated in dialogue tables in the Quellaveco project in Peru. This enabled the company to make commitments to the local community on water management, environmental protection and social investment.

  • A mediation process between Alcoa and an affected Brazilian community on land use sharing for mining and community was established and mediated by Brazilian government authorities and ultimately resulted in benefits and compensations for all parties.

  • Monitoring agencies set up between representatives of Indigenous peoples, local government and businesses to enable joint decision-making and monitoring compliance with the terms of the agreement between the company and local communities. The Snap Lake Environmental Monitoring Agency was set up by DeBeers, the Government of the Northwest Territories of Canada and a number of aboriginal groups. Its board was comprised of representatives of Indigenous groups, and the agency functioned as a “watchdog” to monitor environmental compliance by DeBeers.

  • Tailored approaches that respond to community concerns and go beyond compliance can help companies and communities build trust. In New Zealand, Newmont Waihi Gold (NWG) wanted to expand their gold mining beneath homes of the local community. The company realized that a primary concern of the community related to property damage. In response, NWG set up a number of platforms that went beyond the legal requirements to provide transparency and enable the community a role in decision-making. These included an independent ombudsman for property matters, a policy to guide how the company would respond to matters of property damage, and a community forum with members of the community, the company and local government.

  • Empowered community liaison officers who, in addition to being approachable and personable towards the local community, can take decisive action when concerns are raised. For instance, in Bolivia, Total empowered a Community Liaison Officer to lead dialogue and participatory engagement with Indigenous groups in areas of complex land tenure, improving stakeholder communication and fostering transparent, inclusive social and environmental assessments. This approach, part of a broader human-rights strategy, helped to build trust and align company operations with community expectations.

Alternative Models
  • The Indigenous Peoples’ Rights International (IPRI) and the Business & Human Rights Resource Centre are making the case for a renewable energy transition that centers Indigenous Peoples’ rights, interests and prosperity, as determined by them, in pursuit of a global transition that is fast because it is fair and sustainable. Among other resources, the report outlines emerging benefit-sharing modalities with real-world examples of where and how they are being deployed, as well as recommendations for regulators, renewable energy developers and financial institutions.

  • In Alaska, the Red Dog Mine operation, which sources nearly 5% of global zinc supply, was developed through an operating agreement between Teck Resources and 15,000 Iñupiat shareholders of NANA Corporation.

  • One of the largest seafood companies in the southern hemisphere is 50% owned on behalf of the Māori people of New Zealand and 50% by the Japanese company Nissui.

Other Tools and Resources

General

Sector specific:

Citation of research papers and other resources does not constitute an endorsement by Shift of their conclusions.

Red Flag 1. Offering lowest cost goods or services in ways that put pressure on labor rights

RED FLAG # 1

The business’s commercial success substantially depends upon offering lowest cost goods or services such that it becomes economically challenging for the company or suppliers to respect labor rights.

FOR EXAMPLE
  • Selling apparel and other consumer goods premised on cheapest prices for customers, such that increases in production costs are absorbed through the wages of already low-paid workers
  • Locating (and relocating) production to countries with lowest wages 
HIGHER-RISK SECTORS
  • Commerce sector, in particular “value brand” retail companies, including apparel retail
  • Textiles, clothing, leather and footwear sector
  • Food and beverage sector
Questions for Leaders

Buyers
  • Do low costs in the company’s sourcing locations flow in part from a lack of investment in basic protections for workers? How does the company mitigate attendant risks to people?
  • How does the company know if its buying practices influence suppliers’ ability to meet its expectations on human rights? Does the company seek out feedback from suppliers in this regard, and act on it?

Suppliers
  • How does the company ensure fair working conditions for its workers, both direct and those recruited through labor providers?
  • How does the company engage or collaborate with its buyers on their buyers’ purchasing practices (e.g., lead times, pricing, order volumes)?

How to use this resource. Group 33 Created with Sketch. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )  

Understanding Risks and Opportunities

Risks to People
  • Where the business model is premised on securing cheapest prices for customers (as opposed to other differentiating factors such as quality or service), retail prices often remain constant or reduce, even when costs of production, raw materials or demands for high-speed or just-in-time delivery increase. In such cases the company may use its purchasing power to place heavy price pressure on suppliers working on narrow margins, such that costs are passed onto the most vulnerable people in supply chains – such as factory workers, including migrant workers, women workers, producers and small-holder farmers – affecting their livelihoods and those of their families. (Right to fair/living wage; Right to adequate standard of living)
  • Suppliers under excessive price pressure may be incentivized to demand excessive overtime from workers, not pay or suppress wages or overtime, or not provide safe working conditions. Risks are exacerbated when the company provides little or no commitment to long-term sourcing, disincentivizing investment in improving working conditions. (Right to just and favorable conditions of work; Right to Health)
  • Risks are greatest where the company locates (and relocates) production to countries where minimum or industry wages leave workers in poverty and workers lack adequate protections in law or in practice. These same countries are then incentivized to keep labor costs low to maintain competitive advantage and continue to attract foreign investment from multinational companies. (Right to an adequate standard of living; Right to fair/living wage)
  • Business models centered on delivering low-cost goods and services often impose intense cost pressures on suppliers, leaving little room for investments in worker protections or sustainable practices. As the world transitions to a lower carbon economy, many companies are facing pressure to decarbonize across their value chains. Buyers’ supply chain emissions reduction targets can exacerbate the inherent pressures of the low-cost goods and services business model, when responsibility for emissions compliance, including associated costs, are passed on to suppliers without guidance or financial support for making the necessary emissions reductions. To implement low carbon workflows or investments to satisfy buyers’ emissions requirements in an already cost-constrained environment, suppliers may reduce workers’ wages, require excessive overtime, or underinvest in workplace safety, particularly in regions with weak labor protections. Other buyers’ decarbonization strategies that could negatively impact supply chain workers if not managed appropriately, include:
    • shifting sourcing patterns (e.g., supply chain consolidation or diversification, “agile” supply chains, or nearshoring/reshoring);
    • automating or introducing new low carbon technology or machinery, and;
    • circular economy measures (e.g., reducing production, reducing waste, renewable or recycled materials).
  • Further, as the physical impacts of climate change intensify — including rising temperatures and more frequent extreme weather events, such as storms and flooding — workers in supply chains face escalating risks, particularly in labor-intensive sectors like fashion & textiles, and food and beverage. In environments where employers, under pressure to keep production costs low, are unwilling or unable to invest in climate change adaptation measures, such as heat adapted conditions, adjusted working hours, or paid leave during extreme weather, workers endure growing exposure to heat stress, dehydration, or accidents. Productivity losses – already shown to be linked to extreme heat – impact employers’ costs and output potential, as well as workers’ wages and job security. A study by the Global Labor Institute found that without significant investment in climate change adaptation, physical climate impacts on workers in the fashion sector will only get more pronounced as global temperatures rise, with increasingly devastating impacts on workers and job availability in major production hubs like Vietnam and Bangladesh. These impacts will be particularly acute for groups that are already more economically and socially vulnerable, such as migrant workers, women, or smallholder farmers. Thus, failure to adapt or maladaptation has the potential to further exacerbate the negative risks to people inherent in this business model.
Risk to the Business
  • Financial, Reputational, and Operational Risks: Companies operating in a hyper flexible sourcing context (i.e. where sourcing can move quickly and easily between multiple locations) may benefit from lowest prices, but face reputational risks linked to the ease of exploitation of low-skilled, low-paid workers in such sourcing geographies with minimal protections for them. The short-term and remote nature of many supplier relationships can reduce buyers’ leverage to do anything about abusive behaviors in their supply chain when they are highlighted by civil society, consumers or their own audits.
  • Operational, Regulatory and Reputational Risks: Companies may find themselves unable to guarantee traceability as suppliers under extreme price pressure often sub-contract production, leading to a longer, less transparent and less controllable supply chain.
    • In December 2024, a report by China Labor Watch revealed that coffee farms supplying Nestlé and Starbucks were engaging in labor practices that violated both companies’ sourcing standards. The investigation uncovered that the drive to meet demand for lower cost coffee products resulted in suppliers sub-contracting from smaller, uncertified “ghost farms” at which there were recorded instances of child labor, excessive working hours, lack of formal contracts, and inadequate safety measures. This resulted in operational, regulatory and reputational risks for Nestle and Starbucks who were: (i) accused of contravening their own ethical sourcing standards, (ii) at risk of non-compliance with supply chain regulation in key markets, and (iii) making headlines in major news outlets.
  • Financial Risk and Business Opportunity Risk: Data shows consumer concerns about lowest price apparel goods, for example, and an increase in the number of consumers, particularly younger consumers and higher income consumers, who state that they would be willing to pay more for ethically sourced, sustainable goods. This suggests that there could be important shifts in consumer preferences that will impact lowest cost goods. Failure to address this may have financial implications including in the form of missed opportunities to adapt.
  • Financial and Operational Risks: The Global Labor Institute at Cornell University published a study mapping out the supply chains of six unidentified low cost global apparel brands operating in Bangladesh, Cambodia, Pakistan and Vietnam. The study found that all six would be hit materially by extreme heat and flooding, which could “erase USD 65 billion in apparel export earnings” by 2030, as workers struggle under high temperatures and factories close.
  • Regulatory Risk: Operating on a low cost goods and services business model can be associated with regulatory risk. Regulation has been tabled in some jurisdictions to reduce waste associated with low cost goods. Some examples include:
    • In 2025, France’s Senate approved a law seeking to curb advertising by companies selling garments with extremely rapid turnover, low cost and short lifespans, with enforcement now awaiting passage through a joint committee and presidential signature. It targets all media advertising—including digital, traditional, and influencer ads—and is proposed to take effect on January 1, 2026.
    • Noting, among other things, that “garment workers face the brunt of the [fast fashion] industry’s race to the bottom”, lawmakers introduced legislation during New York’s 2025/26 legislative session seeking to mandate environmental and social due diligence for the apparel and footwear sectors for companies with over $100 million in global revenue, requiring supply chain transparency and due diligence, with penalties for non-compliance.
    • The EU has agreed on binding rules that force brands—especially low-cost, fast-fashion producersto finance textile waste collection, sorting, and recycling under an extended producer responsibility system, with fees targeting ultra-fast production. From January 1, 2025, all EU member states are required to implement separate textile collection, while digital passports and stricter eco-design standards further mandate durability, recyclability, and supply-chain transparency and traceability.
What the UN Guiding Principles Say

The UNGPs note that companies should “strive for coherence between their responsibility to respect human rights and policies and procedures that govern their wider business activities and relationships [including] …. procurement practices” (Principle 16, Commentary).

Where the incentives for impacts are embedded in the buying company’s purchasing practices, it may systematically rewards buyers for placing extreme pressure on suppliers, and punish those that invest in protections for workers in ways that raise their costs (and therefore prices to the buying company). In such circumstances, the company may be considered to contribute to impacts on supply chain workers. Similarly, where the company executes a strategy to benefit from wages below a living wage, including, in some cases, by lobbying against minimum wage increases, it may contribute to the impacts experienced by workers.

Possible contributions to the Sustainable Development Goals (SDGs)

Addressing impacts to people associated with this red flag can contribute to, inter alia:

  • SDG 1: End Poverty in All its Forms Everywhere, in particular

    • Targets 1.1 and 1.2 on eradicating extreme poverty and reducing by half the number of people living in poverty (according to national definitions).

  • SDG 8: Decent Work and Economic Growth, in particular

    • Target 8.8 on protecting “labor rights and promot[ing] safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.”

  • SDG 10: Reducing inequalities within and between countries
    This goal becomes relevant as profit margins and returns are concentrated at the buyer/investor level, with less and less value making it into the pockets of the poorest in the supply chain

  • SDG 12: Responsible Consumption and Production, in particular

    • Target 12.5 on substantially reducing waste generation through prevention, reduction, recycling and reuse.

Taking Action

Due Diligence Lines of Inquiry

For Buyers:

  • Do our contracting/tendering processes unduly incentivize cost cutting or disincentivize supplier investment in rights-related improvements (e.g. annual bidding for contracts; procurement decisions based on lowest-cost alone). How do we ensure that lowest price bids reflect greater efficiencies rather than externalization of costs onto supply chain workers? Have we considered the five principles of responsible purchasing that Better Buying has identified that affect a supplier’s ability to provide good working conditions?

  • How do we incentivize and reward our in-house buyers and how do they perceive the factors on which they are judged to succeed? Do we consider factors other than lowest price (e.g. relationship and capacity building; adherence to sustainability codes etc.)?

  • Do our in-house buying staff have sufficient knowledge, incentives and support to assess how and when their decisions will place human rights at risk, and to know from whom to seek assistance when they do?

  • How do we know whether our buyers follow our processes, rules or guidelines in practice when engaging or contracting with suppliers?

  • Do we engage with our suppliers in ways that help us understand how far they can go to meet our demands while still respecting the rights of their workers? Do we work with suppliers in countries of production to increase worker protections?

  • Do we take a short term, transactional approach to supply chains or do we develop supply chain partnerships?

  • How are we engaging with our industry peers to uphold human rights in our shared supply chains, recognizing this is a pre-competitive issue? Are we engaging in multi-stakeholder initiatives that are actively working to improve wages and livelihoods in the supply chain?

  • How have we engaged with our suppliers on our GHG emissions reduction strategies and the potential implications those strategies could have for supply chain workers?

  • How are we integrating the potential impacts on supply chain workers of physical climate change impacts (e.g., extreme heat and flooding) into our expectations for suppliers?

For suppliers:

  • Do we have sufficient knowledge, incentives and support to assess how and when buyer decisions will place human rights at risk?

  • Do we engage regularly with our buyers to help them understand the implications of their demands on respecting the rights of workers?

  • Do we provide constructive feedback to buyers on purchasing practices that have negative impacts on workers, either through direct engagement or through buyer ratings services?

  • How have we explored using legislative requirements (e.g., from the EU) to engage with buyers on their purchasing practices and changes that can support more effective due diligence?

  • Do we understand the potential impacts of buyers’ climate-related emissions reduction requirements on our workforce and have we communicated them to the buyers?

  • How have we factored physical climate change impacts (e.g., increasing frequency, duration and severity of extreme heat) into our operations and expectations of our workers?

Mitigation Examples

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

  • Increasing leverage through collaboration: Given the systemic nature of the issues, collaborating with other companies may be one of the most effective ways to affect change. For example:

    • ACT is a coalition of over 40 global apparel brands, working alongside IndustriALL Global Union to secure living wages through industry-level collective bargaining. Building on the original Memorandum of Understanding, brands are committed to ensuring their purchasing practices support higher wages via five key commitments—including itemized labor costs, fair terms, responsible exit strategies, and mandatory training—underpinned by the ACT Labour Costing Protocol and a robust Accountability & Monitoring Framework. In May 2024, ACT and IndustriALL signed bilateral support agreements focused on wage improvements and better working conditions in the Cambodian garment and footwear sector.

    • Launched in 2023, the UN Global Compact Forward Faster initiative calls on companies to commit to ensuring 100% of their employees earn a living wage by 2030. Participating companies must also develop joint action plans with suppliers to extend fair wage practices through their supply chains. Early steps include wage assessments, pilot pay adjustments, and public reporting to drive sector-wide accountability. Over 1,400 businesses, including JA Solar and Adiantes, have joined with measurable, time-bound wage targets.

  • Understanding and addressing pressures on farmers and suppliers: The Farmer Income Lab, launched by Mars, with Dalberg and Wageningen universities and Oxfam USA, is a collaborative effort to identify ways to increase smallholder farmers’ incomes – beginning with Mars’ supply chains in developing countries – and to understand how to create positive outcomes for farmers at scale.

  • Focusing on purchasing practices: The Better Buying Institute (recently acquired by Cascale) is an organization that provides tools and research to help companies improve purchasing practices in ways that support fairer, more sustainable supply chains. Better Buying’s anonymous supplier feedback system enables suppliers to confidentially evaluate their customers’ purchasing practices across areas such as planning and forecasting, payment terms, and order changes, which provides structured and candid insights that might not otherwise be shared openly, helping buyers and suppliers to identify where practices may create unnecessary cost pressures or labour rights risks. For example, Under Armour has used these supplier evaluations to address issues such as forecast accuracy, production timelines, and vendor training. SanMar, a large US-based wholesale apparel supplier, has publicly shared its Better Buying scores to demonstrate its commitment to transparency and accountability. The company has also used the supplier feedback to refine its forecasting processes, reduce last-minute order changes, and improve communication with manufacturing partners.

  • Exploring customer willingness to pay for better practices: In April 2024, as part of its participation in the Tony’s Open Chain initiative, Waitrose introduced a small yellow “Tony’s Open Chain” label on its private-label chocolate bars and raised prices by about 10%, which the company reported having had a positive impact on its sales, at least in the early weeks of its sales. Member brands of the Tony’s Open Chain collaboration— which includes Waitrose, Aldi, and Ben & Jerry’s—commit to paying a living-income premium above Fairtrade prices to bridge income gaps for cocoa farmers. The initiative is reporting early positive outcomes related to reduced child labor rates and reduced deforestation.

  • Partnering with expert organizations to pilot new approaches: In 2021, Brands Fashion, in partnership with GIZ and Fairtrade, piloted a living wage initiative covering around 1,000 textile workers in India. The project certified the company’s entire supply chain under the Fairtrade Textile Standard, making it the first apparel firm to achieve this. These 1,000 workers were employed in selected certified factories where Brands Fashion had established relationships and sufficient influence to implement wage increases, worker training, and democratic representation.

  • Recognizing and acting upon the correlation between human rights and overall supplier performance: Research by Business Fights Poverty and Cambridge Institute for Sustainability Leadership, supported by Shift, has highlighted a direct correlation between how a supplier treats their workers and the overall performance of that supplier on a range of factors. Research interviews with buyers identified a clear link between the quality and reliability of suppliers, and the working conditions and levels of pay received by workers in supplier factories. As such, mitigating risks to supply chain workers can help to mitigate other risks associated with supplier performance and create the opportunity for improved business performance. To measure this correlation, the procurement teams of some leading companies now benchmark and track the corporate payback from investments in responsible purchasing practices.

  • Integrating extreme heat adaptation actions into supplier codes of conduct: Levi’s’ 2025 Supplier Code of Conduct addresses the brand’s expectations for workplace health and safety across its strategic suppliers and has explicit expectations for managing extreme heat, which specify requirements such as the provision of potable water near work areas, shaded or cooled rest zones, and defined work/rest schedules.

  • Contributing to a regulatory environment that enables respect for rights: In 2014, eight apparel brands wrote to the Cambodian deputy prime minister and the chairman of the local Garment Manufacturers Association to say they were “ready to factor higher wages” into their pricing.

Alternative Models


In the US, the Fair Food Program, established by The Coalition of Immokalee Workers (CIW) in 2011, brings together the CIW, farmworkers on participating farms, farmers and retail food companies. Among the many facets of the program is a “penny per pound” premium that is paid by participating buyers on top of the regular price paid for tomatoes or other covered products. The premium is then passed through by farmers as a bonus on worker’s paychecks, which are monitored by the Fair Food Standards Council, the program’s independent monitoring body. See further from Shift here.

Alternative models can focus on differentiating through quality and/or ethical and transparent sourcing. Various “slow” movements (“slow food,” “slow fashion”) etc. offer products in which the value proposition incorporates fair, transparent and sustainable sourcing and manufacturing, with a focus on durability and quality.

The ETI highlights examples in the apparel industry, including:

  • Nudie Jeans (higher priced but ethically sourced and more durable jeans)

  • People Tree (apparel produced using organic cotton, sustainable materials and traditional skills that support rural communities)

  • Crowd farming” (consumers receive food directly from source and sponsor the cultivation of raw materials)

ASKET is a Swedish menswear company that operates on the premise of a permanent, season-less collection. They focus on producing only “essential” garments that are continually refined, reducing overproduction and quick style turnover. They sell directly to consumers at full cost transparency—detailing origin, factory working conditions, and itemized pricing—with the aim of shifting focus from cheap volume to long-term value. ASKET generates around $10 million in annual sales by relying on a transparent, durable-focused business model that also emphasizes repair and resale programs to support a full lifecycle approach and to differentiate from a low-cost, disposable fashion model.

Tony’s Chocolonely prioritizes ethical sourcing, fair labor practices, and long-term sustainability over price minimization. The company implements five core sourcing principles: 100% traceable beans, paying higher prices to farmers, empowering farmers to have greater control and bargaining power in the supply chain, establishing long-term purchase agreements, and supporting improvements in bean quality and productivity. The company also introduced a feature it refers to as “Mission Lock,” which is a legal structure focused on maintaining the company’s ethical mission, preventing any changes to its core values and sourcing principles.

Other tools and resources

Case example

  • Rana Plaza Factory Fire (IHRB)

Citation of research papers and other resources does not constitute an endorsement by Shift of their conclusions.

Living Wage Accounting Model and Progress Tool

Shift, the Capitals Coalition and Forvis Mazars are making available a free downloadable Progress Tool for companies to account for their progress towards implementing living wages. The Progress Tool has been developed to enable standardized, meaningful, and comparable reporting on progress towards living wages made by companies in their workforce and first tier supply chain.

Companies can enter wage data, use whichever recognized living wage estimate they prefer, and receive clear metrics that can be disaggregated to facility, region or country level or aggregated globally. The results can be used to track progress over time and identify hotspots requiring priority attention.

About the Progress Tool

The Progress Tool provides the most accurate insights when companies can input actual wage data, as they are able to do for their own employees. Companies that have signed up to UN Global Compact’s Living Wage Target to achieve 100% of employees earning a living wage by 2030 can use the Progress Tool to meet their reporting obligations.

The Progress Tool is available to be downloaded in three different versions, depending on the level of available wage data.

To be used for employees and all other worker categories for which full wage data is available.

To be used for core contractors, non-core contractors and first tier supply chain workers when full wage data is not available.

To be used for core contractors, non-core contractors and first tier supply chain workers when neither full wage data nor average wage data is available.

Each version of the Progress Tool includes a Guide for how to input data.

By using the Progress Tool, companies can understand for themselves, and demonstrate publicly, the extent to which they are helping the lowest-paid workers who contribute to their financial success achieve a living wage. Furthermore, it supports companies to meet the growing demands of investors, due diligence legislation, and reporting standards.

The three-year project to develop the Living Wage Accounting Model, on which the Progress Tool is based, involved extensive consultation with, and learning from companies, investors, standard-setters, living wage initiatives and accounting experts.

Generous funding from Porticus and the Tipping Point Fund have made the project and development of the Progress Tool possible.


Background

Efforts to tackle growing levels of inequality and poverty around the world are increasingly focused on the payment of a living wage. That’s because realizing the human right to a living wage is essential to raising the living standards of the most vulnerable workers and their families – and to fulfilling a range of other human rights, including rights to food, water, health, adequate housing, education, family life, and fair working hours.

The wider impact on society is also clear. Studies have shown that reductions in poverty and inequality can lead to greater social cohesion, as well as benefits to business. Paying a living wage can deliver not only a more motivated and productive workforce, with lower staff turnover, but also improved revenues and profits and increased value chain resilience and performance.

Until now, there has not been a generally agreed, straightforward and measurable way for companies to reflect their work to achieve living wages in their public reporting. As a result, investors, civil society and other interested stakeholders have not been able to access the information they need to compare companies’ progress, assess which are contributing to the solution and push those sitting on the sidelines to play their part.

“To get more companies to walk the talk on paying a living wage, we need to define what success looks like, and how to measure progress along the way. And we need common metrics for companies to account for that change in their public reports. Only then can markets reward those companies that are part of the solution to today’s growing inequalities, and push others to play their part.”

Caroline Rees President of Shift

The Accounting for a Living Wage project created a model that helps paint a picture of the scale and scope of the living wage deficits experienced by workers, as well as progress towards living wages over time. Having a shared and simple methodology to track and report on progress has proven key to the success of similar efforts to embed sustainability goals in business decision-making.

The Living Wage Accounting Model can be used to:

  • Deliver greater transparency regarding the payment of Living Wages
  • Inform new standards around Living Wages
  • Create incentives for improving wages and reducing inequalities.

It has been designed to support the work of:

  • Investors and CSOs – who can use the information disclosed by companies to make assessments and incentivize better performance
  • Businesses – who can use the model and Progress Tool to measure and disclose their progress on living wages in a standardized way
  • Standard setters – who can embed the model in their standards to ensure that companies provide valuable, comparable information

PROGRESS TOOL DEVELOPED WITH


The Living Wage Accounting Model

3 resources
September 2023
A Model to Measure Progress on Living Wages

The background to the project and the rationale for developing a model to measure progress on living wages.

September 2023
Using the Living Wage Accounting Model

The metrics, basic and expanded disclosures and accompanying statements of methodology that companies can follow to measure and report their progress on living wages.

September 2023
Contextual Indicators

A set of additional disclosures that draw on existing indicators related to living wages. When used in conjunction with the Accounting Model, these disclosures provide companies with a comprehensive Living Wage Reporting Framework that follows the ISSB four-part framework of Governance, Strategy, Risk Management and Targets and Metrics.

Building Consensus Around Just Transition metrics

Companies, standard setters and financial institutions increasingly recognize the need to bring a human rights perspective to climate action in service of a just transition. And standard-setters are already reflecting these expectations in the laws, regulations and other standards they develop. We see more and more organizations using narrative – or ‘qualitative’ – indicators to describe how human rights considerations are integrated into companies’ efforts to mitigate and adapt to climate change. However, descriptions alone will not enable companies and others to know just how successful these efforts are in practice. We are missing the quantitative metrics that are also needed to measure what is working and what isn’t, to know which are the successful approaches that should be scaled and replicated, and to be able to account for the results. 

Shift has been exploring the opportunity to build broad consensus around a core set of quantitative, sector-agnostic metrics that can supplement qualitative indicators and help provide the full picture necessary to assess the ‘justness’ of the climate transition. 

We aim to keep this a simple set of sector-agnostic metrics that does not – because it cannot – address all issues and variations. We hope that they can then be built on further in the future to meet the specific circumstances and needs of different sectors, with their differing roles in achieving a just transition, and the differing local contexts in which they operate. 

We will also need to keep these initial metrics within the realm of data that can reasonably be gathered and provided by companies, while recognizing – and hoping – that the art of the possible will improve over time. They should be capable of being applied in the context of full ‘transition plans’ or in relation to more diffuse activities targeted at the transition. In either case, the metrics would apply within the same ‘boundaries’ – in terms of facilities, locations or other fields of action – as those plans and activities and their associated climate metrics.

The final set of just transition metrics should be one that can be embedded in sustainability reporting standards alongside important contextual information. 

Figure 1 demonstrates how they might fit into the four-pillar structure that is common to many reporting standards today.

Figure 1

We are sharing here an early draft – a work in progress – of a potential set of such metrics. They build on our experience working with the Global Reporting Initiative, which has made ground-breaking progress on just transition metrics as part of its 2025 revision of its Climate Change reporting standard. They also reflect inputs and suggestions from various organizations and ‘just transition’ experts. We are grateful to all those who have provided their insights to date. 

We plan to continue and expand these conversations in the months ahead, as we know there is much that remains to be improved. Achieving a broad consensus around the current best-in-class metrics should bring clarity and value to all stakeholders: companies themselves as they try to measure what matters; data providers and investors who need this information for their own services and decisions; and reporting standard-setters needing to ensure consistency for preparers and insight for users of disclosed information.

We look forward to engaging with organizations interested in providing expertise and feedback to this effort, including organizations from the Global South. We welcome all inputs and advice as part of this continuing collaboration. 

Understanding Impact Materiality: ESRS Reporting for Financial Institutions

This publication draws on Shift’s involvement in drafting the European Sustainability Reporting Standards, our expertise in the UNGPs, and our advisory work and research on banks’ approach to double materiality assessments (DMA). Although this publication refers to banks, the content also applies to other financial institutions who are likely to be connected to severe impacts via their portfolio companies, such as asset managers, asset owners and insurance companies.

Financial institutions and other companies are currently preparing their first reports under the EU’s Corporate Sustainability Reporting Directive (CSRD), based on the European Sustainability Reporting Standards (ESRS). Many banks, however, appear to be incorrectly interpreting and applying the requirements in the ESRS on impact materiality. These misinterpretations would severely undermine the double materiality assessment (DMA), which is the cornerstone of sustainability reporting. The result of flawed DMAs is that banks will fail to report on material human rights impacts that they are involved with via their client relationships.

This resource offers urgent clarifying guidance for banks to ensure that their Double Materiality Assessments adequately meet EU reporting requirements by leveraging the underlying international standards on corporate respect for human rights (the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines).

Business and Human Rights: A Primer for Government Mission Personnel

This Business and Human Rights Primer for Government Mission Personnel is for all Government mission personnel – from diplomats to embassy, mission, and agency staff – whatever their responsibilities, and wherever they work. 

The primer provides an overview of business and human rights and the UN Guiding Principles on Business and Human Rights. Crucially, it includes practical resources to help mission personnel meaningfully engage with the business and human rights issues that arise in the field.

The primer is designed to equip government mission personnel to communicate clear expectations that can help advance business respect for human rights.